Apple has long been America's most valuable company, but now Microsoft is poised to seize the throne. For a few minutes on Friday, Microsoft overtook Apple as the world's most valuable publicly traded company.
A MarketWatch review of the companies suggests that Apple is no longer a growth stock and that Microsoft is the tech giant's best long-term investment.
After the stock market closed on Friday, Apple was barely able to cling to the top, with its market value reaching $2.892 trillion, slightly ahead of Microsoft's $2.887 trillion. So far this year, Apple stock is down 3.4 percent, while Microsoft stock is up 3.3 percent.
Microsoft is growing faster
One important factor highlighted is the price-to-earnings (P/E) valuation. Apple's P/E has doubled over the past five years, from 12.3 to 27.7 – an increase of 125 percent. While Microsoft's rating rose 46 percent, to 31.7, partly due to Microsoft's profits each year. The company's share increased much faster than that of the competitor.
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Source: Market Watch
Analyzes of companies' compound annual growth rates (CAGR) of sales and profits per share over the past five years also indicate a trend. Apple has grown faster than the S&P 500, but Microsoft has grown even faster. Estimates obtained from FactSet suggest that Apple's future growth will lag the index and fall far behind Microsoft.
Rapid growth usually justifies a higher stock price, so it also makes sense that Microsoft is now trading at a higher future earnings multiple than Apple's stock price. But it's hard to justify Apple's premium compared to the entire S&P 500 based on these numbers, MarketWatch wrote.
Analysts' recommendations reinforce this opinion. After a strong 2023 for both companies, the stock price is expected to see moderate growth next year, but analysts largely favor Microsoft.
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